NBFC stocks plummet on Friday

The shares of NBFCs experienced sudden and heavy selling pressure on Friday. The rising cost of borrowing of housing finance companies is a major concern for the investors. 

The crash can be attributed to some mutual funds selling bonds in distress after a large unnamed non-bank lender defaulted on loans two weeks back. 

Infrastructure Leasing & Financial Services (IL&FS) Ltd. defaulted on a series of payments, the latest being reported on September 10, when it failed to repay Rs 1 billion to Small Industries Development Bank of India. The company reported a gross debt of Rs 910 billion. As of March 31, bank loans availed by IL&FS measured up to 0.5-0.7 per cent of overall bank loans. The lack of clarity pertaining to IL&FS’ exposure concerning its liquidity crunch, the absence of government intervention and the tightness in the money market contributed to the investors’ knee-jerk reaction in today’s trading session. 

Dewan Housing Finance Corporation (DHFL) evidenced a dismal stock performance, with the stock hurtling down 57.42 per cent, engendering a loss of approximately Rs 10,000 crore in terms of market capitalisation. The news of DSP MF being forced to sell DHFL commercial papers in the secondary market at a higher yield due to liquidity concerns did not bode well for the investors. They linked this news with other NBFCs that have commercial papers as a source of funding. However, DHFL and Indiabulls Housing Finance confirmed to business news channels that their loans were being repaid on time and that they have no direct/indirect exposure to IL&FS. 

Indiabulls Housing Finance, IL&FS Investment Managers and Religare Enterprises were among the major losers, registering a fall of 29.88 per cent, 19.84 per cent and 19.52 per cent, respectively. 

India Cements Capital (up 11.28 per cent), Mukesh Babu Financial Services (up 9.78 per cent) and Jindal Capital (up 4.99 per cent) were among the handful of stocks that managed to withstand the headwinds in the stock market today. 

The BSE Sensex fell about 1,128 points and then recovered to 36,854, down 267 points at the close.